Brexit, hated by some – coveted by others, is the day when the United Kingdom parted ways with the European Union (EU). On 23 June 2016, UK electorate voted to leave the EU in a referendum. This created a stir and led to a series of negotiations between the UK and EU to decide how it will impact the trade of goods, service industry, people and capital if they proceed with Brexit. The UK will officially leave the EU on 31 January 2020.
Britain is a member of the European Union’s customs union and single market. This entitles the UK to be a part of a single trading deal that comprises of 28 other members. Due to this, they don’t have to pay tariffs, go through border checks and deal with VAT.
In this article, you will learn about seven ways in which Brexit can impact businesses in the UK and how you can protect your business against its repercussions.
How Will Brexit Impact Businesses?
Here are seven ways in which Brexit can impact UK businesses.
1. Import and Export
After Brexit, import and export of goods and services will become more difficult and costly. Businesses will have to pay VAT, custom duties and excise duties, which would increase the cost of imports drastically. Importers and exporters might also have to deal with port blockages, which might lead to more delays. For instance, you might face two days delay on goods that are exported from the UK to EU countries. All Heavy Goods Vehicles (HGV) needs to comply with French customs requirements. Unfortunately, only 50% to 85% of vehicles comply with these requirements, which can lead to even more delays.
2. Cost of Doing Business
Apart from import and export, Brexit will also lead to an increase in energy costs. Gas and electricity expenses will skyrocket as some of the energy suppliers will wrap up their business operations after Brexit. This will create a vacuum in the energy sector and businesses will have to pay a hefty price for it in terms of higher energy costs.
With shrinking profit margins, businesses will find it tough to stay afloat in the wake of increasing cost of doing business. More importantly, a higher cost of doing business will also put off budding entrepreneurs who are planning to start their businesses, which will have a negative impact on the UK’s economy as it slows down.
3. Impact On Financial Services
The financial sector in the UK contributes 12% to the UK’s total GDP, making it one of the most important sectors in the UK economy. Don’t be surprised if you witness some of the financial services being disrupted and their operations coming to a halt. Even though local financial service providers won’t be affected by Brexit but multinational financial service providers will undoubtedly take a hit. This will affect other industries that rely heavily on borrowing which in turn will destabilise the UK’s economy.
4. Business Travel
With new immigration checks in place, Business travel could become even more difficult. What’s even worse is that UK nationals who are working as employees in other EU member countries might lose some of their fundamental rights and healthcare coverage. Depending on the country the employee is working in, the situation might vary. With many states still lacking proper legislations, you cannot expect the situation to improve anytime soon.
5. Transport and Logistics
Whether you are planning to transport goods and services through, land, air or sea, you might find many hurdles along the way. After Brexit, UK-based airlines will no longer be considered a part of “Community Air Carriers” and take advantage of Establishment of a European Common Aviation Area agreement. This means that these airlines will lose their right to fly to and from EU countries.
UK rail operators will no longer be able to participate in franchise tender processes and bid for tenders in the EU. Even though Brexit will not hijack the rights of British shipping companies, but they will have to pay taxes and duties applicable to goods moving from different EU countries.
6. Data Flow
Brexit will not only impact offline businesses, but it will also impact online businesses. With the UK already adopting GDPR and making it a part of the Data Protection Act 2018. After GDPR and Brexit, the flow of data will never be the same. If you have already a GDPR compliant business, Brexit might not affect you that much. If your business is still not GDPR-compliant and you are transferring data from the UK to the EU, then you might optimise processes for data handling and inform users about how their data will be used.
7. Compliance and Safety Rules
After Brexit, EU rules related to product safety and eco compliance will no longer be applicable and EU licenses will no longer influence your product packaging and labelling. Even the copyrights, patents and trademarks you brand has registered might be in trouble after Brexit. Additionally, the mutual recognition of relevant licenses such as banking, audit and insurance licenses will end after Brexit.
How To Minimize The Impact of Brexit on Your Business?
Here are some of the ways to protect your business from harmful impact of Brexit.
- Expand your business globally
- Bring reforms
- Switch to renewable energy sources
- Make bureaucracy more efficient
- Develop skills
In what ways does Brexit impact businesses and how can you protect your business from it? Feel free to share it with us in the comments section below